Boosting Ghana’s Pharmaceutical Sector Through South-South Cooperation

pharma production line1Ghana has the second most significant pharmaceutical manufacturing sector, after Nigeria,  in West Africa.

Thanks to stringent criteria, inspection and enforcement requirements by the Ghana Food and Drugs Authority (FDA), the country boasts some of the best quality locally-produced pharmaceuticals in the sub region.

But inadequate strategic focus and support on the part of government continue to pose a serious threat to the sector.

Ghana’s pharmaceutical manufacturing sector currently comprises 38 registered firms, employing a wide range of professionals including pharmacists, chemists, engineers and technologists. More than 75 per cent of the companies are owned by Ghanaian entrepreneurs, some of who are listed on the Ghana Stock Exchange.

The local industry has an installed capacity for both solid and liquid dosage forms to supply all domestic needs as well as enough for export. There is however capacity under utilization, less than 55 per cent on the average, as a result of inadequate resources. The Ghanaian pharmaceutical market is thus made up of approximately 30 per cent locally produced and 70 per cent imported products, the latter originating mainly from India and China.

But  Ghana’s plan to meet the demand for pharmaceutical products through local production could face a major challenge as local firms encounter low production due to lack of capital injection and a heavy tax burden.

The challenge has resulted in most companies producing below 45 percent, leading to an increase in the importation of pharmaceutical products to supplement local supply.

Total percentage of taxes and charges that pharmacies incur on imported drugs add up to 96 percent.

A  breakdown of the taxes and charges shows that pharmacies are paying 10 percent on duty, 17.5 percent on VAT & NHIL, 0.5 percent ECOWAS levy, 0.5 percent network charges, 1 percent inspection fee, 1 percent on IRS, EDIF 0.5 percent, SIL 2 percent, Interest charges 2 percent.

All these sum up to 35 percent.

Other charges are clearing charges, transport and haulage, and miscellaneous, which amounts to 5 percent.

Translating this to real terms, the importer incurs 40 percent taxes and charges on essential medicines at the port before conveying them to the warehouse. The situation is further compounded when other expenses such as cost of supply and distribution come into the picture.

Indeed, a recent Ghana Chamber of Pharmacy report actually reveals that hedging against forex exchange fluctuations attracts a 5 percent tax, cost of finance for four months is 10 percent, storage cost (example: warehousing, special storage medicines needing 24 hours) regulation also incurs 5 percent cost, distribution cost is 5 percent, gross mark-up is 15 percent and overhead expenses, FDA registration, salaries and others attracts 11 percent cost. The accumulation of all these cost sums up to 56 per cent. This takes the total percentage of the cost of clearing and wholesale distribution of an imported medicine to 96 percent.

But with the rapid expansion of South-South trade and regional integration coupled with Africa’s performance emerging a bright spot in a still uncertain global economy, Ghana’s pharmaceutical industry could draw inspiration from the success of its Moroccan counterpart.

Comparative to Ghana, Moroccan authorities have worked to implement a price reduction policy for drugs. The latter, initiated in December 2013 and implemented in June 2014, has seen the prices on up to 800 medicines reduced, with encouraging implications for future consumption.

Morocco’s pharmaceutical industry has developed into an experienced and well-established sector which exports to the world. Homegrown firm Laprophan, founded in 1949 as a family business by Abderrahim Bennis, has played a vital role in the development of the sector. The government’s biggest pharmaceutical supplier, it remains very strong in the private sector, producing over 400 products and working with international partners such as Pfizer, P&G and Danone.

As Morocco’s domestic market, now worth an estimated $1.51 billion, has grown, so too has the company’s commitment to cutting-edge in-house R&D, which has resulted in innovative patent products registered in over 110 countries including the United States.

Today, Morocco produces around 400m boxes of medicine a year allowing it to meet up to 70 per cent of domestic demand for medication, with 10 per cent of the market accounted for by direct sales or bulk orders purchased directly by pharmacies from pharmaceuticals firms.

The kingdom is also Africa’s second-largest pharmaceutical exporter, after South Africa, with seven to eight percent of production now leaving the country, largely southward.  Following the expansion of its 990,300 square foot (92,000 square meter) state-of-the art manufacturing plant, however, Laprophan is looking not just to boost exports to Africa but also to the Middle East, Europe and the Americas.

To get its pharmaceutical sector to where it currently is, Morocco adopted a number of measures to improve the legal framework governing the sector.

These included reforms to see reduce authorisation delivery duration from two years to 10 months.

The review of legislation governing bioequivalence was also addressed, helping stimulate the market for generic drugs, which currently comprise 33 per cent of the market. Integral to this reform is a draft bill protecting participants of clinical trials presented to the Moroccan Parliament in January 2015.

It is expected that the market for generic drugs, which currently accounts for around a third of produced drugs in Morocco, is envisaged to be a major benefactors of the unfolding scenerio.

Ultimately, these regulatory changes will translate into a significant opportunity to advance scientific research carried out locally to boost innovation.

The African pharmaceutical sector today is already a $20bn market with annual growth of 20 per cent driven by the emerging middle classes and the medical needs of a population increasingly concerned with its well-being.

Much of this growth is concentrated on countries with only a fledgling domestic industry, forcing them to rely on cheap Indian and Chinese imports whose quality can leave much to be desired.

For while large international pharmaceutical players, for example, have prioritised countries like South Africa and Egypt with what was seen as bigger potential, they have largely ignored smaller markets and left them untouched.

Not so with the Moroccan pharmaceutical industry which already generates $1.5bn in revenue per annum, with the top five companies each recording profit revenues in excess of a hundred million dollars.

And some of these companies , in line with the kingdom’s drive for south-south cooperation,  are actually expanding to sub-Saharan African countries including Ethiopia, Gabon and Senegal through local distributors but also through their own manufacturing when required.

And there is no shortage of opportunities.

Examples of successful African expansion from a Moroccan base include Cooper Pharma and Sothema, the latter a listed company on the Casablanca Stock Exchange. They now generate up to 10 per cent of their revenue from their wider African operation.

Indeed, Moroccan pharmaceutical players are showing they have both the means and ambitions to deploy their capabilities in neighbouring markets. But they are not the only reason why Morocco should be seen as a true regional powerhouse for north and west Africa. There are other sectors, too, with the potential to leverage strong local manufacturing know-how, economies of scale and an ever improving export platform.

Ghana’s and Morocco’s pharmaceutical sectors can mutually benefit from such south-south cooperation.

By Gamel Sinare

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